JEDDAH, 7 October 2007 — It’s not news that Saudis like to purchase gold. But with Ramadan here and Eid Al-Fitr only a week away, rising prices have put a pinch on many gold dealers around the Kingdom this year.
Demand for gold in Saudi Arabia, the world’s fifth largest jewelry market, reached a total of 42.5 tons in 2006, according to data from the gold demand trend report published by the World Gold Council (WGC). Second quarter reports also issued by the WGC showed that demand in the Kingdom surged 30 percent during the same period providing further support for Saudis’ admiration for the precious metal.
But it appears this demand is cooling down. Ahmed Salim, marketing and sales manager at Lazurde’ Gold Jewelry in Riyadh, told Arab News that the high prices this year has made a difference in sales. Without citing specific figures, he said that his company is witnessing a slowdown.
Arab News also contacted popular Saudi gold jewelry dealers Ahmed Al Fitaihi Co. to get an estimate on the sales outlook this Ramadan but was declined comment by the company’s marketing manager, Hatim Al-Kandiry.
The only ones who seem even moderately happy about the price increase are investment-minded Saudi consumers who are now selling.
“I usually purchase gold jewelry for my wife and three daughters every Eid Al-Fitr,” said Abdullah Al-Harthy, a Saudi father of five. “This year because of the high prices they have asked me to sell the gold that I purchased them in previous years and save the money until the price goes down when I can buy them even more.”
Hadeel Al-Mansouri, a Saudi teacher in a private high school in Jeddah, said: “It just makes sense to sell whatever gold you have and save the money for other needs during the holidays or to invest after the price returns to normal.”
Anoud Al-Shammari, 17, said she’s going holiday shopping but will avoid the precious metal.
“I usually save my Eid money (Eidia) to buy myself a few nice pieces of jewelry but this year I have decided to avoid the gold market opting instead to buy myself some new clothes or a laptop for school,” she said.
But what are analysts saying about the price of gold? Will it continue to climb or will we see a major decrease in the coming weeks? According to the WGC, gold has extended gains rising to its highest prices in 28 years. The cause, experts say, is the rise in the price of oil to over $80 a barrel coupled with the increasingly weak US dollar. Spot gold prices on Monday closed at $754.10 an ounce before dipping on Tuesday to close at $736.30 on the back of US data supporting a slightly stronger dollar. The price closed at $737 on Friday, signaling a possible capping of a six-week rally that began in mid-August which has seen gold prices catapulting by nearly $100 an ounce.
“With no sign of the dollar ending its slide against major currencies, bullishness is ample on the part of gold prices,” said Pradeep Unni, a financial analyst in Dubai.
Unni also said that profit-taking after an aggressive rally like the one seen on Monday is expected, causing the price to decrease. A recent report by global investment firm Morgan Stanley said: “Gold loves a bear (weak market).” The report said the reason for the leap in gold prices in the last month-and-half is in fact due to the increase in investors rushing to purchase the precious commodity in droves.
Chief economist of SABB Bank in Riyadh, John Sfakanakis, confirmed the claims mentioned in the report by explaining: “Most businesses and individual investors see gold as a safe-haven during times when the US economy witnesses a slowdown, showing signs of a possible recession.”
It’s this volatility that has people avoiding stocks or currency purchases in turn leading investors to put their money into something they trust and gold is usually the safest option because it always holds its value proving the term Morgan Stanley used: “Gold does love a bear.”
